Did you know that financial turmoil is the leading cause of divorce, depression, and suicide? Even knowing that, money is a topic we are reluctant to talk about. But of course, money a necessity for our survival. We trade money for everything: the clothes on our backs, the food we eat, the houses we live in, and even the device on which you’re reading this. But why weren’t we taught about money in school? Sure, you may have taken a financial class or two, but that teacher probably wasn’t a financial professional. And our guess is that no one told you that you will fail financially if you do this one thing. But we’re going to shed some light on the subject.
You Don’t Know What You Don’t Know
It’s unfortunate that the main thing we need to survive was never taught to us to begin with. And it’s not just us saying that; there are facts to back it up:
- 78% of Americans are living paycheck to paycheck.
- Almost half of American households have no money in savings or a retirement plan.
Americans lack the education they need to be financially successful.
Why is that? As a society, we are not financially literate. The money we’re paid is not kept in an environment that can keep up with inflation because we put all of that money in the bank. The inflation rate for 2018 was 2.5%. But banks aren’t keeping up.
A Case Study in Inefficiency
Let’s look at the largest bank in the US for an example. JP Morgan Chase Bank has more than $2.62 trillion in assets. If you have a basic savings account at Chase, you’re earning .01% interest. Upgrade to a premium savings account with less than $50,000, and you’ll earn .04% interest. And if you have more than $50,000 in that account, you’re looking at .07% interest.
Clearly, no one is getting rich from having a savings account.
To illustrate this more clearly, let’s look at something that’s probably a little more relatable. When you were a kid, your parents would say they remember spending 10¢ to buy a Snickers bar which, by the time you were a kid, was $1.25. That’s inflation. If a Snickers bar is $1.25 now, and inflation is 2.5%, this time next year, that same Snickers bar will cost $1.28.
Now let’s take the same cost of a Snickers bar—$1.25—and, instead of buying candy, we put it in a savings account at Chase. The bank will pay .01% in interest over the next year, which translates to $.00013, bringing your balance up to $1.25013. And that means, with inflation, you no longer have enough money next year to buy a Snickers bar at $1.28.
But what if you have a premium Chase account? At .04% interest, you’ll earn $.0005 in the next year, bringing your balance to $1.2505, which still won’t give you enough to buy a Snickers bar.
And if you’re a big saver? At .07% interest, the bank will pay you $.000888 in interest, bringing your total investment to $1.25088—still not enough for a Snickers bar.
No matter which savings account you have, you won’t make enough to afford the Snickers bar next year. Every single year you keep your money in a savings account, you are losing more than 2% and will fail financially. You can’t afford to do that when you’re already behind inflation.
And What About That Premium Savings Account?
Let’s say you have a premier savings account with Chase and deposited $100,000. You haven’t touched that money in a year. You’re earning a whopping .07% at this level, so at the end of the year, you have $100,070.
Now keep in mind that you have to keep the money in the bank. These interest rates are compounded interest, so if you touch the money, you start the process all over again. Bye-bye, $70.
Not only can you not touch that money for a full year to earn $70, but you’ll still be $2,430 behind inflation.
This is the reason you are guaranteed to fail financially if you put all of your eggs in one basket. And that’s why rich people don’t keep all their money in the bank.
How Do Banks Really Work?
Banks take our deposits and then lend that money out to people as loans. They charge a higher interest rate on loans than they pay on deposits. Banks are charging anywhere from 4% to 26% to loan money, yet only paying pennies for deposits—capping out at .07% in most cases.
Let’s say that you made a deposit in the bank and then need additional money to buy something. The bank will charge you interest to use your own money. After all, it’s the money that you deposited in the bank to begin with.
Are you feeling like you’re on the trail to fail financially yet?
Fractional Reserve Banking
As if that news wasn’t disheartening enough, there’s more. Through fractional reserve banking, banks are able to turn your $1 into $10. They’re able to, essentially, create money out of thin air.
That $1 you deposited into the bank now multiplies into $10 for the bank to lend over and over because they’ve multiplied your money. Remember that the money you see in your account when you log in online isn’t really there. It’s digital money. After all, when was the last time you went to a bank and got a bag of cash for your personal loan? It doesn’t work that way.
Even if you go to the bank and ask for $5,000 cash, they’ll ask you to wait a day since they have to order that money for you. They don’t keep cash on hand. That’s why banks can have trillions of dollars in assets and pay you next to nothing for holding on to your funds.
Banks May Be Bad, but Investing Is Good
Remember that we’re only talking about banking when we share these scenarios. We’re not talking about investing. The trick is to find an environment where we can park our deposits and keep up with inflation.
And that environment is whole life insurance.
With whole life insurance, you can earn a guaranteed 4% compounded interest rate, which will allow you to keep up with inflation.
At a bare minimum, you need to be sure all of your deposits are in an environment that’s keeping up with inflation. The only place we know, from a banking standpoint, where you can park your money is a whole life insurance policy that pays dividends.
After all, it’s your hard-earned money. You want to ensure that the money you’re working for every single day is working for you. That’s why we recommend you put your money in a whole life insurance policy. It is designed with a high cash value so you can still access your money and keep it working for you, earn the guaranteed 4%, and continue to invest, which will allow you to generate even more interest back into your own banking system.
You Won’t Fail Financially When You Do What the Banks Do
Wondering how we know this whole life insurance system works? Where do you think the banks put all their savings and extra funds?
News flash: The banks are the largest purchasers of whole life insurance.
Remember those premier accounts at Chase Bank that pay .07% interest? The bank has close to $10 billion—just in cash value—of whole life insurance. Wells Fargo has more than $19.3 billion in cash value. Bank of America has $18.5 billion in cash value. And Citibank has in excess of $4.5 billion.
When we say cash value, we mean liquid capital that banks have on hand and can access that’s growing at the guaranteed 4%.
You shouldn’t ignore this news. Why are the banks buying whole life insurance, yet we consumers are taught to buy term insurance and invest the difference?
And this isn’t just banks. Did you know that one-fifth of Fortune 500 companies have whole life policies that they use to fund their businesses and pay their executives?
The solution is simple: We should be buying whole life insurance the same way banks and successful businesses are buying it.
Are You Ready to Change Your Financial Future?
The decision is yours. You can choose to keep your money in the bank and be behind inflation, or you can do something about it and be in front of inflation—just by putting your money in a different environment.
It’s that simple.
This is the basic foundational principle you need to know to increase your financial literacy. And this is what separates the rich from the poor.
Now that you know how you are guaranteed to fail financially, let us help you change the game. Download our free guide on the 52 ways to own your lifestyle through investing, creating a family banking system, paying off debt, and lending.
And if you want to join a community of like-minded high achievers just like you, we invite you to join our Patreon community. We’ll teach you everything you need to know about infinite banking and how to apply it so you can navigate this sometimes-tricky space.